Proof a College Degree Won’t Help You Get a Raise

A degree may open doors, but once hired, the college educated also experience wage stagnation

Mar 8, 2014 at 2:00PM


"I think I'm due for a raise. I have a college degree..." Photo: bpsusf

There's little doubt that obtaining a four-year college diploma is a real necessity in today's job market, despite the rising cost of higher education. Sadly, once college graduates join the ranks of the gainfully employed, their salaries tend to stagnate – just like everyone else's.

Salaries haven't risen in over 10 years
As many states and the federal government consider raising the minimum wage, it's notable those workers earning the least aren't the only ones that haven't had a raise in several years. Even college graduates have found their salaries have flatlined over the past decade or so.

A study published last August by authors Lawrence Mishel and Heidi Shierholz of the Economic Policy Institute shows just how little salaries have budged since the years 1979, 2000, and 2007. While pay for persons with a bachelor's degree increased by 2.4% from 2000 to 2007, wages actually decreased by 1.3% between 2007 and 2012. From 2000 to 2012, college graduates saw their pay increase by a measly 1%.

Workers with less than a four-year college fared much worse, though the differences between high-school graduates and those with "some" college are surprising: the former group saw pay dip by 1.6% between the years 2000 and 2012, but the latter endured wage disintegration of 5.1% during the same time period.

Productivity and corporate profits rise
At the same time as workers' pay levels have flattened, their productivity has increased. The EPI study notes, during the aforementioned 12-year period, productivity grew by 25%. While college-educated workers' pay was falling during the 2007 to 2012 time period, productivity grew by 7.7%.

So, why haven't workers been rewarded? If you think employers can't afford to give out raises, think again. In manufacturing, for instance, net profits have more than tripled since 2009, while the pay for workers in the sector has actually fallen by 3%.

Manufacturing isn't alone. As this chart from the Federal Reserve Bank of St. Louis shows, U.S. corporate profits have been growing steadily since about 2000 or so, except for the Great Recession:


Unfortunately, this trend shows no signs of abating, and workers themselves have few options in the still-tenuous economic climate. Currently, the only remedy is for college students to pursue graduate degrees – the one group, according to EPI, that has seen wage appreciation in the years 2000 to 2012 of 5.4%.

Hopefully, an increase in the minimum wage will prompt a boosting of all salaries to some extent, in a sort of trickle-up scenario. Otherwise, wage stagnation looks like it is here to stay.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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